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Monthly Archives: February 2015

Just over a year ago, managers at Kraft believed that their Velveeta brand had only moderate growth prospects. With the consumer migration toward natural and organic products, sales of Velveeta—a processed, unrefrigerated “cheese food”—had languished. The customers who did buy it typically used it once or twice a year, usually to make a party dip. But as we began working with Kraft and analyzing supermarket scanner and consumer panel data, we found a hard-core group of Velveeta fans. They constituted 10% of buyers but accounted for 30% to 40% of revenue and more than 50% of profits. In focus groups, these buyers—whom we dubbed superconsumers—said that they think of Velveeta as superior cheese. They love the way it melts smoothly and easily, and they have myriad uses for it, ones that range far beyond dips (one person even claimed to use a little when making fudge). After we finished questioning the superconsumers, they traded recipes, e-mails, and phone numbers with one another—building friendships around their shared passion for Velveeta.

To restart Velveeta’s growth, Kraft decided to focus on these superconsumers, a group whose size we estimated at 2.4 million. The product team had recently launched refrigerated Velveeta slices, for use on burgers and sandwiches. It had also introduced refrigerated shredded Velveeta, for use in casseroles. Both launches had been surprisingly strong, but they now took on much more importance in light of the superconsumer strategy. Some retail partners began moving the product to the refrigerated dairy aisle, where products have a much higher rate of sales. The strategy inspired a pipeline of innovations to meet new uses. Kraft also began gathering customers’ recipes and finding ways to circulate them among the faithful. “The previous thinking was that the quickest, easiest path to growth was to identify light users or lapsed users,” Greg Gallagher, the marketing director at Kraft Foods, recalls. “But when we talked to superconsumers, we learned that in fact they wanted to use Velveeta more—they were starving for it.” The new product launches have generated more than $100 million in sales. Just as important, managers believe they have found a viable growth strategy for the first time in years.

Every marketer is familiar with the Pareto principle. Known colloquially as the 80/20 rule, it suggests that one-fifth of a product’s buyers are responsible for four-fifths of sales. A similar effect applies to superconsumers. Using Nielsen supermarket scanner data, we analyzed the top 124 consumer packaged goods categories and found that on average, superconsumers represent 10% of a category’s customers but account for 30% to 70% of sales and an even higher share of profits. Most managers take care to offer VIP treatment to these big spenders in order to ensure their continued loyalty, but few make them a focus of growth plans. They assume that these customers are already maxed out and can’t be persuaded to buy more—or they believe other myths about them. In our work with CPG companies, however, we routinely see brands that are able to grow sales by finding new ways to appeal to these customers. And the phenomenon isn’t limited to CPG categories: We have seen companies successfully execute superconsumer strategies in industries as wide-ranging as apparel, consumer durables, and financial services.

Reaping Benefits Beyond Sales
It’s important to distinguish superconsumers from other segments of buyers. They aren’t quite the same as “heavy users”—a product’s highest-volume buyers, in traditional marketing terms. Heavy users are defined simply by the quantity of their purchases. Superconsumers are defined by both economics and attitude: They are a subset of heavy users who are highly engaged with a category and a brand. They are especially interested in innovative uses for the product and in new variations on it. They aren’t particularly price sensitive. Superconsumers tend to have more occasions and “jobs” for a product. Think about hot dogs: While many consumers view them primarily as a food for backyard barbecues, superconsumers see them as an ideal fast meal or an after-school snack.

In our experience, many managers are quick to dismiss the concept of superconsumers or to regard it with skepticism. But as companies build up their analytic capabilities, they are becoming increasingly adept at identifying and engaging these consumers. When they do, they not only find that these shoppers have good reasons for buying so much, but also often discover a hidden appetite to buy more—even in the most unlikely product categories.

Staplers are a prime example. Most people have just a single stapler—or maybe two, one at home and one in the office. But in our work with an office supply company, we identified stapler superconsumers, who own eight staplers each, on average. These consumers don’t do more stapling than other people. Their stapler buying is related to a need to be highly organized: They believe that the presentation of the papers they staple together matters as much as what is on the papers. So they want just the right stapler for each stapling occasion. They keep different sizes and shapes in various places—their offices, their kitchens, their purses, their cars. Absent these findings, common sense might suggest that there would be little ROI in trying to sell someone who owns eight staplers a ninth or a 10th one. But the analysis proves that selling those additional staplers to superconsumers is a smarter growth strategy than simply selling replacements for broken or lost staplers to “normal” consumers.

Companies that focus on superconsumers can realize benefits far beyond an opportunity to drive sales growth. Because superconsumers are already buying your products, it’s easy to reach them. This means that you can dramatically increase the efficiency of your advertising and promotions. Instead of trying to activate lapsed users through expensive mass-market campaigns or paying large sums to deliver coupons to customers who haven’t bought your product in months (and probably won’t buy it now), you can focus your efforts on a narrow slice of your customer base. Direct and digital marketing are often much more effective with superconsumers than with others. That effectiveness can be especially valuable to large CPG companies, some of which spend billions of dollars a year on advertising—and for which a 1% increase in the efficiency of ad spending can therefore be worth tens of millions of dollars.

Many superconsumers are superb at offering insights that can drive product strategy. Because they are passionate about the category, they are an ideal audience for testing out new-product ideas—and in many cases, they themselves are the source of new ideas. Consider another Kraft brand, Breakstone’s sour cream. Shannon Lester, a Kraft brand manager, and his team discovered that many of its superconsumers were blending it with Greek yogurt to create something that tasted like sour cream but had about half the fat and cholesterol and twice the protein and calcium. Breakstone’s had once come up with a similar combination, but the mixture had failed to gain traction even inside the company. After Kraft embraced the superconsumer strategy, however, it retested the product, this time targeting its superconsumers, who loved it. Moreover, many of them offered input that helped Kraft optimize the product, and their insights about presentation helped it gain mass appeal. Demand for Breakstone’s Greek Style sour cream grew so rapidly that the product was available in 60% of U.S. grocery stores within months of the retest—astonishing speed for the success of a new product.
The most important thing we’ve learned in our work with companies that have decided to focus on superconsumers is that the new strategy can become a rallying cry for an organization—particularly one that has been marketing an old, slow-growing product perceived as unexciting. Like many of the best strategies, it is simple to explain, it appeals to logic, and it is easy to back up with data. “To be honest, I was a nonbeliever at first,” says Cannon Koo, the director of analytics at Kraft Foods. “I thought, How are these consumers any different from heavy users? But as we did more and more research, we began uncovering more and more insights that were quite different from what we were used to seeing from heavy users.” Today the Velveeta team uses the superconsumer strategy to plan its media buying, trade promotions, and new-product lines. The brand’s general manager says that in his nine years at the company, he’s never seen a more tightly integrated brand plan.

The superconsumer phenomenon points to a virtuous circle: Often companies can do well by showing more love to the customers who love them the most.

The Central Bureau of Investigation on Thursday filed its final probe report in a coal block allocation case allegedly involving former Coal Secretary P C Parakh, Hindalco and others before the special court which will consider it on March 11.

Senior public prosecutor V K Sharma told the court that the agency has completed the investigation and one more witness has been examined during the course of probe and they are filing his statement in a sealed cover.

“Further investigation is complete. We have further examined one more witness. We are filing his statement in a sealed cover. Our final investigation is over now,” Mr. Sharma told Special CBI Judge Bharat Parashar.

The court said that it would now consider the CBI’s final report in the case on March 11 and if required it will seek clarifications from the agency.

“Final compliance report has been filed by Investigating Officer along with statement of one more witness in a sealed cover…. The matter be now put up for consideration on March 11,” the judge said.

During the hearing, the prosecutor told the court that they are also filing all the materials and documents related to the case in the court.

The case pertains to allocation of Talabira II coal block in Orissa to M/s Hindalco in 2005.

The CBI, in its FIR, had named Parakh, industrialist Kumar Mangalam Birla, M/s Hindalco Industries Ltd and other unknown persons for the offences under section 120—B (criminal conspiracy) of the IPC and under provisions of the Prevention of Corruption Act.

However, later, the agency had filed a closure report in the court which had refused to accept it.

The court, in its December 16 order, had directed the agency to examine Manmohan Singh and some top PMO officials, including Singh’s then Principal Secretary T K A Nair and then private secretary B V R Subramanyam.

Hyundai Motor India, on Wednesday, launched the updated version of its mid-size sedan Verna, priced between Rs.7.74 lakh and Rs.12.19 lakh (ex-showroom Delhi).

“Our aspiration is to reach 5 lakh sales mark in the domestic market. The updated Verna would definitely play a significant role in achieving this milestone,” Hyundai Motor India Ltd (HMIL) Senior Vice President, sales and marketing, Rakesh Srivastava said. Last year, Hyundai Motors had sold 4.11 lakh units in the domestic market.

He, however, did not give any timeline to achieve the target. “We are looking to achieve this target soon,” Mr. Srivastava said.

The new Verna that will compete with Honda City and Maruti Ciaz, will be available in both petrol and diesel options and have ten variants.

The company has so far sold 2.78 lakh units of Verna in the domestic market since its launch in 2006.After initial success, Verna began losing out to rivals in the mid-size sedan segment.

For the April 2014-January 2015 period this fiscal, Honda City sold 61,102 units, while Maruti Ciaz, which was launched in October last year, sold 23,490 units till January. On the other hand, Verna had sold 25,216 units during the period.

“The changes which we have brought in the new Verna will definitely help in making it a strong player in the mid-sized sedan segment. The company has a line up of products,” he said.

The biggest challenge for the country is to help talented young people fulfil their aspirations, State Bank of India Chairperson Arundhati Bhattacharya said today, while terming demographic dividend as an opportunity for growth.

“If you look at India, the biggest challenge and opportunity today is demography. You have this young country, and you have one million people who are joining job market every month. How do you look at the aspiration of these people and how do you fulfil them ?” she said during a panel discussion on ‘India 2025- Challenges and Opportunities’, organised by Bombay Management Association (BMA).

ITC Chairman Y C Deveshwar said creating employment is a very big challenge. “If you look at 2025, this (job creation) problem is going to grow larger. Creating sustainable employment which is environment friendly are the two big challenges that our country has to address, right now, and at an accelerated pace tomorrow,” he said.

The biggest potential for growth in jobs will come from manufacturing sector, he said.

Tata Group’s chairman emeritus Ratan Tata said India’s demographic pattern not only presents strong workforce but an intellectual cadre of people who can prove themselves and stand up to foreign competition.

“In the years that I have been in industry, I have watched India transform itself from a protected country and becoming an open economy in early 90s, and then seeing its complete change of political leadership, in the last year, to an India which is now poised with a great deal of aspiration and expectations, but poised with a new government and a new leadership and I think great desire to be a country that will stand up and be counted in the economic scene,” he said.

India today has young people who are listened to because they are successful, but more importantly because the environment is willing to listen to them, he said.

Standard Chartered Bank’s India CEO Sunil Kaushal said the strong demographic dividend of the country can become demographic disaster if it is not managed properly by creating job opportunities and skilling the population.

Snapdeal founder and chief executive officer Kunal Bahl said the county needs more entrepreneurs who can help in solving real world problems.

Kotak Mahindra Bank executive vice-chairman and MD Uday Kotak said if India has to progress and education has to be the key, then there is need for more and more people to join teaching profession.

Talking about infrastructure which requires a lot of funding, Bhattacharya said, infrastructure cannot be created unless there is is long term capital.

“There is no dearth of capital in the world, and the reason why it does not find home in India is because India is not able to provide the clarity and consistency that this capital needs in order to find a home,” she said.

She said investors do not always look for returns but they need clarity and consistency.

“Its about not changing the rules of the game while the game is on. It is about ensuring there is no sovereign risk. In that, if the sovereign says something then it is the sovereign that is saying something and therefore it is something that will get honoured,” said Bhattacharya, who was given BMA Management Woman Achiever of the Year Award 2013-14.

Retail giant Walmart is planning to open 15 cash-and-carry stores in Andhra Pradesh in the next five years, the state government said today.

This was stated by President and CEO of Walmart India Krishna Iyer during a meeting with Chief Minister N Chandrababu Naidu here.

This followed Naidu’s meeting with David Cheesewright, President and CEO of Walmart International, at the World Economic Forum in Davos last month, a government release said.

Iyer informed the Chief Minister that Cheesewright had asked him to meet Naidu and unveil Walmart India’s plans for Andhra Pradesh. Iyer thanked Naidu for introducing the single- desk policy and 21-day clearance plan and said it will make the investment environment conducive in the state.

“He said Walmart is planning to open 15 cash-and-carry stores in the next 5 years. The company currently had three stores in Andhra Pradesh – in Vijayawada, Guntur and Rajahmundry,” the release said.

Iyer said the US-headquartered company’s plan is to have wholesale stores in every district. He added that Walmart is also keen on investing in social and rural entrepreneurship through Corporate Social Responsibility (CSR).

Stating that the company wants to focus on creating women leaders, Iyer said they intend to build skills of self- help group women in the State.

Responding to Iyer’s plans, the Chief Minister said Walmart could also explore setting up of cold-chain facilities and work on backward integration of agriculture.

Explaining the state’s strength in farm sector, the Chief Minister told Iyer that the company could choose 20-30 agriculture commodities which the state tops in and market them through Walmart, according to the release.

“You can focus on value addition and marketing while the government will work on the processes,” the CM told Iyer.

“Given that Walmart is the world leader in retail, you can suggest the best practices the company incorporates in different countries which we can implement locally, in our state,” the Chief Minister said.

Subrata Roy and his Sahara Group has been embroiled in logjams with regulatory body Sebi since 2009. Ultimately this led to his arrest in 2014 where he still languishes.

The Supreme Court set a mammoth bail bond of $1.6 billion if he wants a release. The Court allowed him to use jail premises to negotiate deals to sell his hotel properties and raise the bail money.

However, with Bank of America saying it has nothing to do with Sahara’s deal with Mirach Capital, Sahara accused Mirach of forgery. Mirach has hit back denying the accusation and still ready to buy Sahara’s overseas hotels and give him the money needed to secure his exit from the jail for the time being. Sahara, however, has initiated legal action and is back in the market for a fresh deal for its hotels. The bail money remains elusive and Roy remains in jail.

The Sahara story since its beginning in 2009.

September 2009: Sahara Prime City decided to raise money from public. Files draft prospectus with SEBI.

State Bank of India (SBI) missed street expectations on Friday with the third quarter profit rising 30.3 percent year-on-year to Rs 2,910 crore. The profit was impacted by higher provisions but was supported by other income and operating profit. However, the improvement in asset quality drove the stock higher by 6 percent. Net interest income of the public sector lender rose 9 percent to Rs 13,777 crore during October-December quarter from Rs 12,640 crore in the year-ago period, which was slightly better than expectations. Net interest income is the difference between interest earned and interest expended. According to a CNBC-TV18 poll, profit was expected at Rs 3,254 crore and net interest income of Rs 13,654 crore for the quarter. SBI says advances grew 7.3 percent on yearly basis to Rs 12.33 lakh crore while deposits jumped 11.9 percent to Rs 15.1 lakh crore during the quarter. Other income (non-interest income) jumped 24.3 percent year-on-year to Rs 5,237.80 crore and operating profit grew 22 percent to Rs 9,294.5 crore in December quarter. Provisions for bad loans increased 26 percent year-on-year (up 22.5 percent sequentially) to Rs 5,235 crore in the quarter gone by. SBI says (out of total provisions) provisions for non-performing assets shot up 37.6 percent Y-o-Y (up 17 percent sequentially) to Rs 4,717 crore during the quarter, adding provision coverage ratio was 63.56 percent as on December 31, 2014. The biggest positive factor in earnings was the improvement in its asset quality. Gross non-performing assets (NPA) stood at 4.90 percent of gross advances in Q3FY15 against 4.89 percent in previous quarter and 5.73 percent in the year-ago period. Net NPA was 2.80 percent during the quarter, increased from 2.73 percent in Q2FY15 but declined from 3.24 percent in corresponding quarter of last fiscal. In abosolute term, gross NPA fell 8.6 percent (up 2.1 percent sequentially) to Rs 61,991 crore on yearly basis. Net NPA also declined 7.3 percent year-on-year to Rs 34,469 crore in Q3FY15 but up 4.5 percent on sequential basis. Fresh slippages in Q3FY15 dropped sequentially to Rs 7,043 crore from Rs 7,700 crore while fresh restructuring was Rs 2,580 crore during October-December quarter, declined compared to Rs 3,448 crore in previous quarter. Recoveries and upgrades for the quarter were Rs 667 crore while the bank’s write-offs stood at Rs 5,096 crore in Q3 against Rs 4,787 crore in September quarter. Capital adequacy ratio (as per Basel III norms) stood at 12.03 percent in December quarter against 12.33 percent in previous quarter and 11.59 percent in the year-ago period. Total expenses of the India’s biggest lender in Q3 increased 9.7 percent to 34,489.51 crore compared to a year-ago period while operating expenses rose 5.5 percent to Rs 9,720 crore during the same period due to higher other operating expenses. However, employee cost declined marginally to Rs 5,842 crore from Rs 5867 crore on yearly basis. At 12:36 hours IST, the scrip of State Bank of India was quoting at Rs 300.25, up Rs 15.85, or 5.57 percent amid high volumes on the BSE.